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Audit & Assurance > Chapter 1 - Auditing & Assurance Services > Flashcards

Chapter 1 - Auditing & Assurance Services Flashcards

1
Q

todays information is…

A

more complex, demanded by remote users, demanded in a more timely manner, has far reaching consequences, and international reach

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2
Q

what is informational risk?

A

the risk that the information given by the client will be materially false or misleading

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3
Q

users demand…

A

an independent third party assessment of the info

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4
Q

an audit is..

A

an independent third party assessment of the info

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5
Q

what is business risk?

A

the risk that an entity will fail to meet stated business objectives

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6
Q

what did Bernie Madoff do?

A

ran a Fonzie scheme that used newer investors $$ to pay off older investors

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7
Q

what is a Ponzi scheme?

A

investing other people’s $$

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8
Q

assurer example

A

assurer is the authenticator at a pawn shop

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9
Q

Engagements relationships

A

assertive engagements include attestation engagements which include audit engagements

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10
Q

the goal of assurance services is to…

A

improve quality of information, or its context, for decision makers

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11
Q

examples of assurance services include…

A

XBRL reporting, information risk assessment, customer satisfaction surveys, internal audit assurance, fraud and illegal acts prevention, cyber risk audit and assurance

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12
Q

what is XBRL?

A

information format designed specifically for business reporting through “tagging” specific items. XBRL facilitates the collection, sumartization, and reporting of financial information so decision makers can use it

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13
Q

XBRL utilizes…

A

“tagging” specific items

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14
Q

XBRL facilitates the ___, ___, and ____ of financial info

A

collection, summary, and reporting

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15
Q

XBRL is ____ by the SEC

A

required

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16
Q

what are NFTs?

A

non-fungible tokens, basically any asset that is virtual

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17
Q

what is an attestation engagement?

A

any info that management produces that they want a 3rd party assurance for

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18
Q

in an attestation engagement, a practitioner assesses and reports on…

A

subject matter, or an secretion about subject matter that is the responsibility of another party

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19
Q

examples of financial attestation engagements (other than audit)

A

financial forecasts and projections, examination of Managements Discussions & Analysis (item 7 on 10K), pro forma financial information

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20
Q

where is Managements Discussions & Analysis found?

A

item 7 on 10K

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21
Q

what is pro forma financial information?

A

if a merger happened, it is adjusted projection of prior years financials

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22
Q

examples of non-financial attestation engagements

A

effectiveness of internal controls, environmental regulations compliance, and sustainability reporting engagements

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23
Q

ESG is…

A

an environmental, social, and governance board presented by IFRS

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24
Q

who is pushing ESG and why?

A

Blackrock, because they want younger investors to invest because of personal values

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25
Q

what is the annual report and who is it sent to?

A

10 K, sent to shareholders and is public

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26
Q

what types of financial statements are often more credible?

A

audited

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27
Q

audited financial statements are ________ credible than non audited

A

always (but not never) more

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28
Q

When was the SOX act created?

A

after Enron collapse

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29
Q

what does SOX clearly indicate about management?

A

management team is responsible for the financial reporting process and the financial statements

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30
Q

Section 302 of SOX states…

A

key company official must CERTIFY the financial statements

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31
Q

(SOX 302) management must sign a statement indicating that they have…

A

read the F/S, are not aware of any false or misleading statements (or any key omitted disclosers), and they believe that the F/S present and accurate picture of the companies financial state

32
Q

Management signs that they believe that their company’s F/S present…

A

an accurate picture of their financial condition

33
Q

Management must sign that they are unaware of…

A

any false or misleading statements (or omitted disclosers)

34
Q

SOX section 302 exists for…

A

liability

35
Q

with SOX 302, investors can…

A

hold someone accountable and make it easier to sue

36
Q

ASB assertions are for what companies?

A

private

37
Q

PCAOB assertions

A

presentation and discloser, existence and occurrence, rights and obligations, completeness, valuation and allocations

38
Q

which PCAOB assertion: sending a confirmation for accounts receivable to a client

A

existence

39
Q

which PCAOB assertion: for account receivable balances, auditor looks at the credit worthiness and past payment history of the client’s customers.

A

valuation and allocation

40
Q

which PCAOB assertion: auditor looks at shipping dates for late sales

A

completeness

41
Q

valuation only affects cash if…

A

foreign $$ is involved

42
Q

confirmations are always which PCAOB assertion?

A

existence

43
Q

included/excluded are always which PCAOB assertion?

A

completeness

44
Q

professional skepticism refers to…

A

auditors questioning mindset towards representations made by management and evidential matter gathered

45
Q

inquiry alone is…

A

NEVER ENOUGH

46
Q

what does the auditor have to obtain in addition to inquiry?

A

sufficient corroborative evidence

47
Q

unusual financial trends need…

A

investigation

48
Q

documents are always checked for…

A

authenticity or possible alteration

49
Q

after asking questions and getting answers, auditors…

A

verify the answers

50
Q

must be skeptical because…

A

a potential conflict of interest must exist between the auditor and the client

51
Q

how does management want to portray the company?

A

in the best possible light

52
Q

auditors want to make sure that managements portrayal of the company is…

A

fair and accurate

53
Q

5 steps in the Professional Judgement Process

A
  1. clarify the issues and objectives
  2. consider the possible alternatives
  3. gather and evaluate the relevant evidence
  4. reach an audit conclusion
  5. carefully document rationale for the professional judgement reached
54
Q

first step in the Professional Judgement Process is…

A

clarify the issues and objectives

55
Q

in the Professional Judgement Process, after you clarify the issues and objectives, you…

A

consider the possible alternatives

56
Q

in the Professional Judgement Process, after considering the possible alternative, you…

A

gather and evaluate the relevant evidence

57
Q

in the Professional Judgement Process, after gathering and evaluation evidence, you…

A

reach and audit conclusion

58
Q

in the Professional Judgement Process, after reaching an audit conclusion, you…

A

carefully document rationale for the professional judgment reached

59
Q

at the end of the Professional Judgement Process, you carefully document…

A

rationale for the professional judgement reached

60
Q

examples of public accounting Assurance Services

A

F/S audit engagements, assurance engagements, attestation engagement, compilation, reviews

61
Q

the three types of public accounting services are..

A

assurance services, tax services, and consulting/advisory services

62
Q

in public accounting firm, a partner has ____ and can _____

A

equity ownership; can sign off

63
Q

unlike a partner, a director…

A

cannot sign off or own equity

64
Q

SOX prohibits services that…

A

causes you to audit your own work

65
Q

professional service firms may provide tax services ( with some restrictions) and other non-prohibited services to audit clients if…

A

the audit committee approves them in advance

66
Q

four types of auditors and audits

A
  1. financial
  2. operational
  3. compliance
  4. forensic
67
Q

who are financial auditors?

A

external auditors and CPAs

68
Q

who are operational auditors?

A

interna and gouvernent auditors/CIAs

69
Q

who are compliance auditors?

A

internal and governmental auditors

70
Q

who are forensic auditors?

A

fraud auditors/CFEs

71
Q

what do financial audits do?

A

ensure that F/S are reliable

72
Q

what does operation audits do?

A

improve operational ECONOMY and EFFICIENCY

73
Q

operations audits improve operational…

A

economy and efficiency

74
Q

what do compliance audits do?

A

ensure compliance with company and/or government rules and regulations

75
Q

what does forensic audits do?

A

designed to investigate a crime and will often involve gathering evidence designed to convict a fraudster

76
Q

forensic audits often involve…

A

gathering evidence to convict a fraudster

77
Q

compliance audits ensure compliance with _____ and ____ rules and regulations

A

government, company

Audit & Assurance (12 decks)

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